In class today, my professor gave an offhand example of the power of the size of the market, that still has me thinking.

Imagine that your significant other has just been diagnosed with an extremely rare debilitating disease that only affects about a 1000 people a year around the world. For you and yours, finding the cure for this affliction is paramount. Even a drug to treat the symptoms would be preferable to nothing. Fortunately, a compound X has been discovered that will dramatically improve the patient's condition.

But what incentive does the pharmaceutical company have to create this medicine? The amount of time and money that goes into researching and developming a new drug is non-trivial. Add in the costs of patents, and you begin to see why the pharmas make sure to fully research the potential of the market before launching a new product.

If the disease that your loved one has is only shared by 999 other people, how is the pharma company going to recoup their costs? There's simply not enough sales volume, and therefore, drug X will never get produced. Not until, that is, this disease suddenly goes from affecting 1000 people to 1,000,000. Or perhaps even that isn't high enough.

How many people have to suffer before drug X will prove profitable enough to produce? Will it ever happen? Sad to say, not necessarily.

1 comment:

Taylor said...

"A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one."

In other news: nanotechnology. Medical care for pennies. Assuming, of course, we survive the next couple of decades.